A post-cuts third sector; where business and back office are as vital as compassion

“A hard road, leading to a better future, is how Chancellor George Osborne spoke of the journey ahead of us in yesterday’s Comprehensive Spending Review (CSR).

All I know for certain is that it’s already been a bumpy ride for charities, many more of which, it’s now been estimated, receive public money than previously thought. The Third Sector Research Centre believes that some 35% of organisations (rather than between a fifth and a quarter) get statutory funding and of those, 23,000, or 14%, regard it as their most vital source of income.

In the youth sector alone, the magazine Children & Young People Now, has found that of more than 130 charities, 82% are already being forced to cut youth projects because of funding shortages.

And, even with the very welcome one-year, £100 million transition fund announced yesterday to help voluntary sector groups adjust to new public spending budgets, it is going to get tougher. Think tank New Philanthropy Capital (NPC) warned on Monday that these government funded charities are approaching a “maelstrom”. It expects the sector’s income to drop by between £3.2bn and £5.1bn.

So that’s just some of the bad news. But there is good news too as we peer into the gaping chasm of what Shadow Chancellor, Alan Johnson, has called “the deepest cuts to public spending in living memory”.

Along with the transition fund, there’s £470 million over the next four years to build the capacity of the voluntary sector to deliver the Big Society.

I don’t know what this expanded delivery role will actually mean, the devil will be in the detail, but the CSR adds that it will “look to set proportions of specific services that should be delivered by non-state providers including voluntary groups.”

Could this support amount to enough of a lifeline? Possibly, but only if we are really bold and act now! During the economic down-turn last year, the Charity Commission found that only 32% of charities surveyed had taken steps to limit the impact of the recession, with just 14% reducing costs.

An ostrich mentality isn’t going to help. And I don’t say that lightly. I’ve felt that pain. As a charity chief executive, I’ve had to lose staff on occasions when the funding didn’t materialise.

What my last few years at a venture philanthropy fund have taught me is the importance for charities to concentrate on their ‘back office’ as much as their compassion.

It won’t be for everyone, as charities are driven by much more complex ‘bottom lines’ than pure profit and there will be a learning curve, but there’s much to gain from partnership with business. The Private Equity Foundation (PEF) has organised some 15,000 hours of pro bono support for its portfolio charities so I’ve seen first-hand how powerful it can be. In some cases, we’ve worked with charities which have managed the move away from substantial government funding to more sustainable models, while others have achieved huge growth in impact.

Which leads me to better measurement and evaluation. Only the demonstration of effectiveness will ensure support, as government tenders and pays for more services by results and funders choose between a deluge of ‘asks’.

It’s not measurement for measurement’s sake; evaluation can also help create a virtuous circle as organisations scrutinise the data to see where they can improve outcomes. It will become a vital tool, in what’s likely to become a ‘race for quality’ and more foundations should be prepared to pay for it.

Funding from the public and philanthropists cannot plug the hole left by government cuts. But, I believe that business does have a huge contribution to make in safeguarding the sector and I will be doing everything humanly possible to bring more of its money and skills to charities in the coming years.

One thought on “A post-cuts third sector; where business and back office are as vital as compassion”

As a charity supported by PEF, we have a lot of resonance with what Shaks has to say. For me, her key message is “It’s not measurement for measurement’s sake; evaluation can also help create a virtuous circle as organisations p the data to see where they can improve outcomes. It will become a vital tool, in what’s likely to become a ‘race for equality AND MORE FOUNDATIONS SHOULD BE PREPARED TO PAY FOR IT”.
It is very hard to get funding for the proving rather than the doing, but we are working on it.